Tag Archives: Obama

What Does the Trump Administration Mean for Human Resources?

human-1181577_1280The next several months—and likely the next few years—will be a roller coaster for Human Resources professionals. The differences between the Obama Administration and the Trump Administration are stark in many government arenas, but labor and employment is surely one of the areas where the differences are the most dramatic.

Here are some of the most likely changes that HR will have to address with their organization’s management in the short-term:

1. Immigration

Immigration practice is likely to change, with some changes coming quickly and others developing over the course of several months and years. In the short term, E-Verify will be expanded to check all new workers, and I-9 forms are likely to see increased audits. Industries that are dependent on immigrant workers—both high-tech companies needing H1-B visa holders and those like hospitality firms that need manual and service workers—are likely to see a slow-down in their ability to bring in foreign workers. HR will need to have compliance programs in place.

2. Overtime

The Department of Labor changes to the overtime exemption rule will likely be reversed. Business had objected strongly to raising the exempt salary threshold to $913 per week ($47,476 per year), though most organizations had begun—or even completed—their transition to this increased bright line between exempt and nonexempt positions. Currently, the rule is in limbo, as a federal court has enjoined its implementation, but how the court will rule finally is unknown and the timing uncertain. The new Department of Labor could decide to drop its defense and let the injunction become permanent. Or DOL could propose some modifications. HR will need to advise management on whether to retain changes that have already been implemented and communicated, whether to reverse them, whether to take a “wait and see” approach, or some combination of all of these.

3. Health Benefits

The Affordable Care Act (Obamacare) will change. But the scope and direction of the modifications and repair of this complex statute and its even more complex regulatory scheme have not yet been determined. At the moment, HR can’t do anything, but this is an area that will necessitate time and effort, no matter what happens.

4. Union Organizing

Many NLRB rulings are likely to be reversed. The timing of these changes will depend on when President Trump fills the vacant seats on the Board, but as soon as Republican appointees have a majority, it is likely that we will see a significant tilt toward management-favored positions. In the immediate future, some of the pro-union policies favored in the Obama Administration, such as “quickie elections” and the “persuader” rule (requiring attorneys and other consultants to disclose clients whom they advise on union organizing issues), should be axed. The broadening of the joint employer doctrine—which the Obama Administration had pushed—may also be rolled back.

5. Downsizing

Reductions in force in major employers are likely to receive increased public scrutiny. If jobs are moving overseas, employers need to be ready to justify their moves and to respond to possible Presidential attention.

And over the longer term, HR can add the following changes to its project list:

  • The Obamacare changes are a long-term issue. It is unlikely that employers will need to change anything for 2017, and even 2018 is uncertain.
  • State and local legislative developments will become a bigger area of concern. Issues such as minimum wage increases and paid family leave are likely to see more movement at the state and local levels than through Congress.
  • Diversity practices may get murkier. The mandate for affirmative action at federal contractors may be weakened or repealed, though Congress might push back on President Trump on this issue if he goes too far. HR will need to work with organizational leaders in determining the best diversity policies for their workplace.
  • Also on the diversity front, employees with strongly held religious beliefs may seek greater freedom to object to work assignments and/or to display signs of their beliefs in the workplace. With Christians feeling empowered and Muslims feeling threatened, greater religious tensions in some workplaces are possible. HR will have to assist managers in working through these conflicts.
  • Whether President Trump will support broader immigration reform and whether Congress can pass such legislation are unknowns at this time.

The Society for Human Resource Management has set up a page monitoring workforce developments under the new Trump Administration. It is worth following.

I’ll revisit these issues in a few months to see what changes have developed.

HR professionals, which issue do you most hope changes under the Trump Administration?


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Will Texas Fair Housing Act Case Limit Use of Disparate Impact Analysis in Employment Discrimination Cases?

fheo175I was surprised to realize I haven’t written about disparate impact analysis on this blog before. “Disparate impact” is the legal theory of discrimination that says that covered entities can be liable for statistically disproportionate results of their policies and practices that have an adverse impact on protected classes, even in the absence of any proof that these entities intended to discriminate. If there is a statistical disparity that adversely impacts some group protected by law, then the burden falls on the entity to prove that there is a legitimate business interest for the policy or practice.

1. Disparate Impact under Title VII

Disparate impact has been a valid theory under Title VII since the Supreme Court’s decision in Griggs v. Duke Power Co., 401 U.S. 424 (1971), in which the Court ruled that an employer must justify any neutral policy that disproportionately affects minorities or women adversely. The Court said that Title VII was intended to rectify the consequences of employment practices, not simply discriminatory motives.

The holding of Griggs was limited somewhat in Ward’s Cove Packing v. Antonio, 490 U.S. 642 (1989), where the Supreme Court ruled that plaintiffs must identify a specific practice or policy that adversely affects the protected group, that the employer need only produce some evidence of a business justification for the practice, and that the burden of proof always remains with the employee.

So for over forty years now, employers have dealt with disparate impact cases and have needed to justify any policies that have adverse impacts on women, minorities, older workers, or others protected under the various employment discrimination statutes.

2. Texas Dept. Of Housing v. The Inclusive Communities Project: A Case Under the Fair Housing Act

When I learned that the Supreme Court had taken a case involving the Fair Housing Act, I wondered whether it might have an impact on employment discrimination cases. Both Title VII and the Fair Housing Act permit cases to be brought under theories of either intentional discrimination and disparate impact.

More Perspectives on Health Care ReformThe new case, Texas Dept. of Housing v. The Inclusive Communities Project, is the first Fair Housing Act case to reach the Supreme Court under a disparate impact theory. The Fair Housing Act requires that discrimination be “because of” race, rather than the “adversely affect” language of Title VII, which the Supreme Court has held allows disparate impact statistical analysis. The Court heard oral arguments in the case on January 21, 2015.

The basic issue in the case is whether the 1968 Fair Housing Act only prohibit intentional housing bias, or whether it also prohibit policies that have a negative impact on people in protected classes.  Intentional discrimination is far harder to prove than disparate impact, because motives are not always clear.

In the past, the Obama Administration seems to fear the Supreme Court’s likely handling of disparate impact under the Fair Housing Act. The government has settled two other recent cases.

For a good history of the case, see Lyle Denniston, Argument preview: That housing bias issue is back, SCOTUSblog (Jan. 20, 2015).

Of course, without a decision in the case, it’s hard to know what to think yet. But the oral arguments were interesting.

The Court’s four liberal justices seemed ready to adopt “disparate impact” without any restrictions. Justice Breyer said during oral argument that disparate impact liability under the Fair Housing Act “has been the law of the United States uniformly throughout the United States for 35 years.”

Justice Scalia—typically conservative—wondered whether Congress implicitly adopted the disparate impact theory under the Fair Housing Act when the law was amended in 1988. But he also asked plaintiffs why a statistical disparity should be enough for liability under the Act, if the statutory language requires that housing must be unavailable for a reason related to race. After all, statistical disparities might not be based on race; they merely show a correlation, not causation. And in an earlier employment discrimination case, Ricci v. DeStefano, 557 U.S. 557 (2009), Justice Scalia has seemed dubious about the constitutionality of the disparate impact theory.

For more on Justice Scalia’s comments, see Amy Howe, Justice Scalia keeps both sides guessing in Fair Housing Act case: In Plain English, SCOTUSblog (Jan. 22, 2015).

And as always, Marcia Coyle’s analysis on PBS NewsHour, January 21, 2015, was succinct and clear.

3. What Impact Will the Texas Case Have on Disparate Impact in Employment Cases?

Upon reflection, I think the odds are long that the Texas case will make much difference in employment discrimination cases. First of all, the statutory language is sufficiently different that the Court could well stick with the Griggs v. Duke Power ruling in employment cases. Griggs is a direct precedent in support of disparate impact analysis in employment cases, albeit narrowed by Ward’s Cove Packing.

The second reason for a limited impact is that the Court tends to issues narrow rulings rather than broad, particularly when it is likely to be split philosophically. Even if the Court decides against the appropriateness of disparate impact analysis under the Fair Housing Act, the decision is likely to be a 5-4 ruling (based on the comments of the liberal justices) and is likely to be limited to the Fair Housing Act on its terms.

Third, any employment discrimination cases will have to wend their way through circuit court splits and could take years to reach the Supreme Court. Still, Justice Scalia’s prior invitation is likely to encourage defense counsel in employment cases to start down that path.

What do you think the role of disparate impact analysis should be in employment discrimination cases?

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Impact of Obama’s Immigration Action on Employers

potus_streamlining_legal_immigration_316x159Will President Obama’s recently announced plan to begin executive actions on immigration help or hurt U.S. employers? The short answer is that it is too soon to say.

The more complete answer is that there will probably be winners and losers among both employers and their employees as details of his stance become clear.

1.  What Executive Actions Might Do, Once Regulations Are Issued

President Obama’s executive order might provide relief on L-1B visas, which I have written about before (see here and here). USCIS will finally provide guidance on the definition of “specialized knowledge” for the adjudication of L-1B intra-company transfer visas.

Some immigrant petitions may become more portable, if USCIS clarifies the “same or similar occupational classification” standard and allows petitions to remain valid even if the individual changes jobs or employers. Currently, new green card applications are required if an employee changes employers or even takes a new position with the same employer. But how broad portability will be permitted remains to be seen.

More foreign students may become eligible for Optional Practical Training (OPT) employment authorization, so that these students with bachelor’s degrees in science, technology, engineering, or math (STEM) fields and who are pursuing other graduate degrees (such as an MBA) can continue to use the OPT authorization.

More National Interest Waivers may be available so immigrants who are entrepreneurs, researchers, inventors, and founders of companies can obtain green cards. These waivers may become available not only for self-employed entrepreneurs but also for key foreign employees of larger companies that provide innovation, job creation, and economic benefits.

In addition, some spouses of H-1B workers may have an easier time of obtaining work authorizations, although we don’t know yet whether this will be limited to spouses of all H-1B workers or only those who have reached a certain stage in the green card process.

2.  What Executive Actions Can’t Do

Certainly, executive actions cannot provide employers what they want in terms of an increased number of H1-B visas. Nor can executive action create an agricultural worker program or any other new temporary worker program. These require acts of Congress.

The President also cannot speed up the process for obtaining permanent residency, although some aspects of his recent proposal might allow for more flexibility during the lengthy process.

The employment verification rules are almost certain to become more complicated. We will have to wait until the government issues instructions on how individuals will get their work permits and on how employers must comply with verifying the employment eligibility those who receive these work permits. These permits are temporary in nature, so employers are likely to have to follow up when they expire.

3.  Conclusion

For these reasons, there remains a substantial need for legislative action on comprehensive immigration reform. The only way we will really improve our patchwork of immigration laws is for Republicans and Democrats in Congress to negotiate a workable compromise.

From employers’ perspectives, increased immigration will improve the flexibility of the labor market. At the same time, employers will remain responsible for reasonable verification of workers’ employment status, but employers should not be the primary enforcers of our immigration laws.

In summary, we won’t really know whether President Obama’s executive actions help or hurt employers—or, more accurately, which employers are helped and which are hurt—until we see proposed regulations. Until then, employers should remain cautious and continue complying with existing employment verification rules.

What do you think should change in our immigration laws?

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Complex Impact of DOMA Decision on Employee Benefit Plans

In mid-June, I wrote about the potential impact of the Supreme Court’s same sex marriage opinion on employers. Well, now we know what that impact is – or rather, now we know what we still don’t know.

The Perry v. Hollingsworth decision from California is likely to only impact employers in California. But the U.S. v. Windsor decision holding that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional will impact employers across the nation. Unfortunately, the Windsor decision raised as many questions for employers as it answered.

Because the Court only overturned Section 3 of DOMA, the rest of DOMA remains in place. Most importantly, the Court did not mandate that same-sex marriages be recognized, nor did it overturn Section 2 of DOMA. Section 2 provides that the states are not required to give effect to same-sex marriages entered into in other states. Therefore, the federal laws related to marriage must still accept each state’s definition of marriage.

What does this mean for employers? We are only now beginning to figure this out. We will need to wait for guidance from the myriad federal agencies that regulate and enforce the federal laws related to marriage. In essence, however, it means that employers will have to adapt to a variety of definitions of marriage in different states.

Here are a few of the many recent articles on the impact of the Windsor decision on employers: from the Littler law firm, from SHRM, and from two benefits consultants (Towers Watson and Aon Hewitt).

Major issues after Windsor include:

  • Which state’s law should an employer consider – the state where the employee resides, the state where the employee was married, or the state where the employee works? The answer may vary depending on what federal right or benefit is involved. Moreover, keep in mind that Windsor said nothing about civil unions, domestic partnerships, or anything other than that where same-sex marriages are recognized by state law, they must be recognized for federal purposes.
  • Can multi-state employers standardize on a single practice for their benefit plans (probably using the most liberal definition of marriage and spouse), or will they have to have multiple methods of administering their plans, depending on state law? Most likely, they will a complex maze of plan administration – because for some purposes same-sex partners who have married will be spouses and entitled to certain benefits, and sometimes same-sex partners (whether married or unmarried) will be prohibited from claiming other benefits.
  • What differences will there be under ERISA’s requirements for pension plans and welfare plans? As with most benefit plan issues, the starting points are not only the requirements set forth in statutes and regulations, but also the language of the benefit plan documents. Spouses have more rights under pension plans (for example, for purposes of spousal notice requirements, mandated survivor benefits, and qualified domestic relations orders) than under welfare plans (where definitions in plan documents and insurance contracts may adopt different definitions than required in pension plans).
  • When does Windsor become effective? Is the Windsor decision retroactive? In other words, how soon must employers have systems in place to accurately record same-sex marriages, and must employers un-do and re-do a variety of past benefit plan actions, such as distributions? That’s why employers need prompt guidance from the IRS, DOL, SSA, and other regulatory agencies.

Employers can assume that the Obama Administration will issue guidance that favors quick, and maybe even retroactive, recognition of same-sex marriages. So HR professionals and corporate executives involved with benefit plans need to stay on alert. Read the linked articles in this post for a good start in understanding the specific complications the Windsor decision has raised.

What issues has the Windsor decision raised for your benefit plans?

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Obama’s Plan to Cap Retirement Savings — How Much Is Too Much Income or Too Much Taxation?

????????????????????????????????????????????????????????????????????????????????????In addition to limiting itemized deductions for higher income taxpayers, President Obama’s recent budget proposal also includes a cap on the amount that individuals can accumulate for retirement on a tax-deferred basis. For years, taxpayers have been advised to save as much as possible for retirement in 401(k)s and IRAs. The President’s proposal limits the tax-deferred nature of these plans.

The President wants to limit the tax advantage of all retirement plans to the amount needed to buy an annuity of $205,000/year. Under current interest rate and inflation assumptions, this amount is about $3.4 million. See Blake Ellis, Obama: Limit retirement tax breaks for the rich, CNNMoney, April 10, 2013. The proposal combines pensions, 401(k) plans, and IRAs – all forms of retirement savings accounts – in reaching this cap.

While $205,000 is a very nice income for a retiree, why should the President dictate the standard of living for anyone in retirement? Why should $205,000 be the maximum income that people can accrue through tax-deferred savings? What is his philosophical underpinning for this amount, beyond the President’s frequent theme of “the rich have too much”?

As Robert Lenzner, wrote for Forbes on April 14, 2013, in Obama Goes Against the Grain of What America Represents,

“The whole thrust of this recommendation goes against the grain of becoming self-sufficient, taking care of your own finances rather than depending on handouts.”

presidential sealThe intent of President Obama’s cap on tax-deferred retirement plan savings is clearly to bring more money into the tax system sooner rather than later – and, like many of his proposals, his proposal is aimed at the top 1% of wage earners.

One consequence of President Obama’s proposal may be for employers to reduce their support for retirement savings of any type.  An April 14, 2013, editorial in Investment News, titled Limiting 401(k) tax advantage is unwise, explains the problem. Defined benefit plans (pensions) decreased each time Congress capped the maximum salary on which employers could make tax-exempt pension contributions.  Each reduction led to more defined benefit plans being terminated, and accelerated the move to defined contribution 401(k) plans. Now, 401(k)s will be limited, too.

Moreover, depending on the returns in 401(k) plans over time and the assumptions made about what an inflation-adjusted annuity of $205,000 would cost, the savings cap in the President’s proposal could be as low as $2.2 million. At that level, 6% of young workers could be cut back in their retirement savings before they turn 65. If interest rates increase – which they are likely to do over time – even more young employees could see their ability to save for retirement on a tax-deferred basis limited.

For more analysis, see Could Obama’s Plan To Curb The Boss’ Tax Breaks Hurt Workers’ Retirements?, by Janet Novack, in Forbes, on April 10, 2013, or the Wall Street Journal editorial on April 12, 2013, Now He’s After Your 401(k).

Employers and HR executives should watch the development of the President’s proposal carefully, to determine what the impact is on employees at all levels of their organization.

President Obama isn’t the first politician to advocate limiting tax deferrals on retirement savings. But combined with his other attacks on wealthy Americans, he appears dead set on reducing what top earners can save in any way he can – by taxing more of their income now, and by limiting tax-deferred savings in the future.

I am not entirely opposed to increasing taxes on the top earners, nor even on the middle class. But before we increase taxes further, I think it is important to ask ourselves how much taxation is too much. President Obama has never answered that question. I can’t tell if he has even asked it of himself or his advisors. All he talks about is wanting more from the top 1%.

The President’s  answer to how much is too much taxation might define the philosophical difference I have with him and his supporters.

How much do you think is the maximum that the government should take of anyone’s income? Should the government set limits on tax-deferred retirement savings?

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Tax Reform Still Needed, But Not As Outlined in Obama’s Budget Proposal

I reported last year that my tax returns and supporting worksheets were 297 pages. This year they were 308 pages. We have not had tax reform in the last year (though we’ve had increases in some tax rates). Tax reform is still desperately needed.

The income tax has become a part of the modern economy. I don’t have a philosophical objection to income taxes per se. But I believe in lower tax rates, fewer loopholes, and broader participation by the citizenry.

Every choice made to tax some things and not tax others skews people’s decision-making. They will seek more of what is not taxed, and less of what is taxed. For example, not taxing employer health insurance means more people want health insurance through work, rather than individually purchased insurance. As another example, permitting deductions for mortgage interest means people seek home ownership and mortgages. In the absence of the tax laws, people might choose to rent a home rather than buy.

presidential sealThe decisions on what to tax also show philosophical differences between politicians. President Obama’s recent budget proposal is an example. I disagree with two of the choices he has made – the limitations on the deductions that upper income Americans can take when they itemize deductions on their tax returns, and the lifetime limitations on contributions to 401(k) and other retirement plans.

The rest of this post discusses the limitations on itemized deductions. Next week I’ll cover limitations on retirement plan contributions.

The major categories of itemized deductions on Schedule A are medical expenses, state and local taxes, home mortgage interest, and charitable contributions.  The rationale for limiting these deductions is that taxpayers in higher tax brackets get a bigger percent deduction than middle income taxpayers.

Here’s what will happen if upper income taxpayers are limited in what they can deduct on Schedule A:

  • 1.      Medical expenses

In past years, deductions for medical expenses have been limited to those expenses that are over 7.5% of income. Congress has already passed legislation increasing that limit to 10% in 2013. This means that higher income Americans have to incur much higher medical expenses than other taxpayers before they get any deduction on their Schedule A.

Now the President wants to limit them to a 28% deduction, instead of a higher percent if they are in a higher tax bracket. This means that not only is their threshold higher, but they won’t get a deduction for the full amount they paid.

The Affordable Care Act has already put other taxes on this group of people. Has anyone in the Administration stopped to think about the total tax impact of the ACA on this group of citizens and whether it is the right level of taxation for healthcare?

  • 2.      State and local taxes

One could argue that when people choose where they live, they choose their state and local taxes, and that people can live if they don’t want to bear this tax burden. Still, taxpayers should be ready for double taxation on a part of their income – the states and municipalities will take their share, and with the Schedule A deduction limited, the IRS will take a part again. I would predict more people will leave high-tax states and municipalities if this proposal is passed.

   3.      Home mortgage interest

I actually think a limit on the home mortgage deduction is appropriate, though I’m not sure a percent limitation is appropriate. A dollar limit might be more appropriate.

And given that the real estate market is only just beginning to recover and home purchases and mortgages are long-term decisions, phasing whatever limit is adopted might be better than a sudden change. People can’t adapt to this change overnight.

  • 4.      Charitable contributions

This is the item in the President’s proposal that I disagree with most strongly, because I have a philosophical difference with the President. It seems clear that President Obama believes that the federal government should redistribute wealth in this country, and he wants to use the tax code to assist in that redistribution.

I believe that that Americans should not only decide themselves whether to give away their income, but also that they should be allowed to decide where to give it. If I want to make charitable contributions to a local hospital and my neighbor wants to support a museum, why should we not make these decisions? I do not think the government is better equipped to decide which causes to support than each citizen acting on his or her own beliefs.

Those like the President who disagree with me might say that Americans are still free to give to the charities they want to support. This is true, but as tax rates go up, taxpayers have less after-tax income to give. And if a taxpayer in the 35% tax bracket is limited to a 28% deduction, he or she will have to have $1.25 in pocket to give a dollar to charity. We will have less giving to charity, which is not the result I think this nation wants.

That’s my perspective on itemized deductions.

I also disagree with the President’s proposal limiting lifetime contributions to 401(k) plans. More on that next week.

In the meantime, I hope we can all agree that the tax code is too complex, and start supporting overall tax reform by both Republicans and Democrats. Probably no one will agree with all the changes made; there will be winners and losers. But if we can reduce the overall complexity, and hopefully reduce rates as a result (or at least not raise them), perhaps in the long run we will have a fairer system.

At least it won’t take 308 pages to complete a tax return.

Do you think Americans with higher incomes should face limits on their itemized deductions?


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Executives Execute – At Least the Good Ones Do

Obama SOTUAny manager who has ever had his or her budget cut has to feel just a little bit sorry for President Obama.

After all, at the first suggestion that your budget will be cut, what do you do? You rant and rave about the dire consequences of slashing your budget even one penny. You moan and groan about how what you do is so much more important than what others do.

Then, when your budget actually is cut, what do you do? You go into a deep funk, and stew about the unfairness of life.

And then what do you do? You suck it up, and you do the best you can.

After all, you’re an executive. You execute. You manage with what you have. And you get those who report to you to manage with what they have. Or you get rid of them.

Good leaders get themselves and their organizations through the cycle of ranting and moaning and deep funking and into executing as quickly as possible. The best leaders don’t even let the early parts of the cycle show – as far as anyone can tell, they get straight to the executing, and do the best they can for their organization with the resources they have.

presidential sealSo no matter how dumb the cuts of the recent sequester are, the mark of whether President Obama is a good leader is how well he now gets his administration to handle the budget cuts. How the next year plays out is up to him. Will he make showy cuts to emphasize the stupidity of the sequester that both parties agreed to? Or will he minimize the impact of the cuts on what he considers our nation’s most pressing needs?

(Whether others agree with what are the most pressing needs is an entirely different topic. The issue now is how President Obama deals with his priorities within the constraints of the dollars he has available to him.)

By most measures, the President is not off to a good start. His ranting and moaning and funking were out there for the world to see. And, in a snit, he cut White House tours, which, while not essential to the functioning of government, were a program popular with his customers.

No question we should feel sorry for President Obama, who has to move himself toward executing with everyone watching and offering advice. Everyone has an opinion on which of his budget line items he should cut.  The Friday, March 8, 2013, editorial pages of The Wall Street Journal offered no less than three pieces that detailed suggestions of how to manage sequestration in various agencies – Jumping the Sequester,” by columnist Kim Strassel, The Drama Over, Time For Smart Budget Cuts,” by Senator Tom Coburn (R-OK), and an editorial entitled “Obama’s Not So Grand Offer.  News stories through the weekend on radio, television and in print continued to offer opinions.

But the mark of a good executive is how well he or she executes in hard times.

What will we think a year from now?


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